CFTC approves separate account class for cleared OTC derivatives

On March 31, 2010, the Commodity Futures Trading Commission (CFTC) approved final rules (Final Rules) that enhance certainty regarding protections under the Bankruptcy Code and CFTC regulation Part 190 with respect to Over-the-Counter (OTC) derivatives (and related collateral) that customers clear through a futures commission merchant (FCM) on or subject to the rules of a derivatives clearing organization registered with the CFTC (cleared OTC derivatives). The Final Rules enhance certainty regarding such protections by creating a sixth and separate account class, applicable in the event of FCM bankruptcy, for cleared OTC derivatives.

Additionally, the Final Rules codify the appropriate allocation between account classes of positions (and collateral), in the event of commodity broker bankruptcy, where cleared OTC derivatives are subject to a CFTC order under Section 4d of the Commodity Exchange Act.